HELOC to Pay Student Loans: What to Know and Better Options

If you have a home line of credit (HELOC) and need to pay off your student loans, it can seem like the perfect solution. However, a HELOC can be a costly way to raise money, since you have to pay interest on the loan. Depending on your financial situation, there are other financial options that might work better, such as a home equity loan or a personal loan.

Do you have a high interest student loan that you can’t afford to pay back? Before you run out and borrow more money, you should know about using a home equity line of credit (HELOC) as a potential option. However, there are a lot of things you should consider before taking this route.

The US Department of Education estimates that the average cost of tuition and fees for the 2016-2017 school year was $33,480 at private colleges, $9,650 for state residents at public colleges, and $24,930 for out-of-state students attending public universities. While loans can be an important resource to help you pay for college, you should also know about some other options that may be available to you. How can you apply a home equity line of credit (HELOC) to pay your student loans? The answer is not as simple as you might think. Here are some HELOC facts to help you decide if a HELOC is right for you, and if it is, how to use this tool to pay. Read more about student loan calculator and let us know what you think.If you’ve borrowed money to pay for your college tuition, you may be wondering if there’s a better way to manage your debt. There was a time when people used HELOCs as a way to pay off student loans. HELOCs offered certain benefits that made them advantageous to homeowners with student loan debt. Recently, however, the benefits that once existed have been eroded. Here’s what you need to know about HELOC loans and why applying for HELOC loans may not be the best option for student loan repayment.

How does an MDCL loan work?

A HELOC, or home equity line of credit, is a line of credit secured by your home. A HELOC provides you with a revolving line of credit that you can use for larger expenses. HELOCs traditionally offer lower interest rates than other types of loans, including student loans, and in some cases the interest may be tax deductible. With a HELOC, you borrow money against the available equity in your home. Your home is the collateral for your line of credit. HELOC is more like a credit card than a loan. When you pay off the balance, your credit line increases and you can use it again. It is linked to a fixed period of use, i.e. the period during which you can receive money. The repayment period follows the loan, when the owners repay the loan amount over a certain period of time.

HELOC to repay student loans: Pros and cons

Using a HELOC to pay off student loans can seem like a good idea, and in some cases it is. However, it is not without its drawbacks. Here are some pros and cons of using a HELOC to pay off your student loan debt.


  • HELOCs are generally available at lower interest rates than your current student loan.
  • It may be easier to qualify for a HELOC than to refinance a student loan because HELOCs are secured loans. Instead of a credit check, your home is used as collateral.
  • You can combine your debts into one monthly account.
  • You may end up with lower monthly payments.


  • Interest on student loans is no longer taxable
  • The student loan refinancing rate is now comparable to, or even lower than, the HELOC rate.
  • HELOC does not offer the cash bonuses you may receive when refinancing student loans.
  • You are putting your home at risk because it is the collateral for a HELOC loan.
  • When you transfer student loans to a HELOC, you lose the benefits offered by the government, such as loan forgiveness, income-based repayment plans, and deferred payments.
  • The term of your loan may be extended, which may mean you have to pay more interest over time.

Despite the opportunity to save money and get out of student loan debt, using a HELOC can be a risky endeavor.

Why HELOC loans are not a good option for student loan repayment

Using a HELOC to pay off student loans was once considered a good solution, but now it no longer makes sense. Historically, HELOCs have been considered a good repayment strategy for student loans for two reasons.

1. HELOC loans offered lower interest rates than refinanced student loans. The refinancing rates for HELOCs and student loans are not much different at this point either. If you have a good credit score, you can get competitive rates from many private lenders who offer refinancing. Many of the major private lenders also offer cash incentives when refinancing student loans.

2.It has already offered tax relief. For example, SoFi offered a HELOC repayment program specifically designed to consolidate student loan debt with a mortgage. Withdrawal HELOCs have tax advantages, such as the ability to deduct interest payments on student loans for tax purposes. Unfortunately, these tax credits no longer exist.

If you transfer your student loans to a HELOC now, you are no longer eligible for this tax credit. Not only are there no tax deductions, but a HELOC will likely significantly extend the loan repayment period, meaning you’ll be paying interest over a longer period of time. Lending to LDCs also carries a certain degree of risk. With a HELOC, your mortgage and student loan become one debt, and everything is tied to your home.

Future financial problems may lead to the foreclosure of your home. No one plans for a financial setback, but the possibility exists, and opening a HELOC involves an additional risk for which you may not be adequately prepared.

Alternatives to CDLs for student loan repayment

The good news is that there are other ways to save money and pay off student loans. Here are some options that may be available to you.

Income-based repayment schemes

Switching from a standard repayment plan to an income-based repayment plan can help lower your monthly payments, depending on your disposable income and family size. Participating in an income-based repayment plan won’t necessarily help you pay off your student debt faster, but it can provide some financial relief. After 20 or 25 years, you can even benefit from a repayment of the balance of the loan.

Abolition of student loans

Depending on your situation, you may be able to take advantage of beneficial loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF) or the Teacher Loan Forgiveness Program. To qualify for this program, you must meet certain criteria, but in this case, the balance of your loan can be forgiven without having to pay taxes.

Refinancing of student loans

You can also refinance your student loans, which can lower your monthly payments or pay off your debt faster. If you have a good credit history, you can get a much lower interest rate than federal loans. This alone can save you thousands of dollars in interest payments on your loan over time. But like the HELOC loan, when you refinance, you lose access to the benefits of government loans, such as federal loan forgiveness, flexible repayment plans, and longer grace periods or balloon payments. HELOCs used to be a popular option for student loan borrowers, but you may have better luck if you look at other options first. Analyze your financial and credit situation to determine the right course of action.

Best option for repayment of student loans

What is ultimately the best option for paying off your student debt depends on your personal situation, including your life goals, your family, your income and other factors. If you’re not sure what to do, schedule an appointment with our experts. We have helped thousands of borrowers like you develop a personalized student loan repayment plan. We can do it for you. A plan for a student loan Refinance your student loan and receive a bonus in 2021.

Frequently Asked Questions

Is it smart to pay off student loans with home equity?

The decision to pay off student loans with a home equity line of credit (HELOC) is a highly personal one. While there are several reasons to pursue this strategy, there are also a few drawbacks to consider. (More on that in a minute.) What’s more, there are other options for eliminating student loan debt that may be superior to a HELOC, so be sure to explore your options before taking out a home equity loan. If you have student loans, you likely have a second option to pay them off: your home’s equity.

With a home equity loan, you can borrow up to 80 percent of your home’s value and pay off your existing debt with low-interest payments. This can be an attractive option for some borrowers, but it’s important to consider your options before you take out a loan. The danger with HELOCs is that you may borrow more than you can handle, which can lead to financial trouble and even foreclosure. (See our blog post “Should I Borrow Against My House for Debt?” for the pros and cons of HELOCs.)

Can you pay off student loans with a Heloc?

Can you pay off student loans with a Home Equity Line of Credit (HELOC)? If you’re part of the millions of Americans struggling with student loans, you might be tempted to use a home equity line to pay them off. The question that is not so easy to answer is whether or not this is a good idea. A home equity line of credit should be one of the last pieces of the puzzle in paying off student loans. If you’re considering using your home equity to pay off student loans, consider all the alternatives first. You might be able to get a better interest rate on a student loan consolidation loan—or even better, you might be able to get a better interest rate on a private student loan consolidation loan than you could on a home equity line of credit.

Are student loan planners worth it?

As the cost of a college education continues to increase, rising tuition and student loan debt are becoming a problem for more and more young adults. In fact, the average college graduate in 2015 has over $35,000 in student loan debt. While student loans have become the affordable way to obtain an education, many young adults struggle to repay these loans after they graduate, particularly in a poor economy. A student loan planner is a service that will seek to make you more eligible for student loan forgiveness and other benefits. Student loan forgiveness is a program to help those who have worked in certain occupations find relief with their debt. Find out what a student loan planner can do for you and if they are worth it.


About the Author: Prateek

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